Policy, Finance & Grid Vital to Achieve India’s Ambitious Climate Goals

With a global effort towards a transition to clean energy already underway, India has set ambitious targets for itself — 450 GW renewables capacity to be created by 2030. Despite the country’s many achievements in the last 5 years in the renewables sector, which have resulted in its having the world’s 5th largest solar and 4th largest wind portfolios, challenges concerning finance, policy frameworks and transmission grids remain to be conquered. This was the issue that was discussed at one of the sessions in a virtual energy event yesterday.

Deepak Bagla, Managing Director and CEO, Invest India, believes that India has made real progress in the past 5 years, beginning with Prime Minister Narendra Modi setting a target of 175 GW capacity by 2022 after coming to power for the first time. Much before the deadline, the goal has been revised to 450 GW.

Bangla states that two factors — leadership/policy and an appropriate mindset— will provide an ecosystem for success. Firstly, not only has India opened the renewables sector 100% to Foreign Direct Investment (FDI), but over 50% of it has come in the past 5 years. Secondly, the country’s ability to adopt new technology is has contributed to its success so far. MSMEs and start-ups are accelerating innovation in the energy sector, where the cost per unit of energy has dramatically dropped to 2.7 cents per unit.

The correct policy frameworks can attract investments in India’s thriving renewables sector, but in its early days, the policies resulted from a lot of trial and error. Anita Marangoly George, Executive Vice President, Caisse de dépôt et placement du Québec (CDPQ), recalls that in 2009, the International Finance Cooperation (IFC), the private sector arm of the World Bank, where she was working at the time, financed the first commercial megawatt project in India, which was also the first such project for the entire Wrold Bank group. According to her, India’s role in the evolution of solar industry is not just a story of India’s own energy transition but part of that of the world’s.

She also points out that in addition to multilateral investment, institutional investors like pension funds and sovereign wealth funds have come into the renewable entry space, for which credit goes to early players like the IFC who executed RE projects at a time when there was uncertainty abut where policy frameworks would take them.

It is often said that there’s no transition without transmission. So what role can transmission play in India’s transition? Pratik Agarwal, Managing Director, Sterlite Power, believes that India has one of the strongest interconnected grids anywhere in the large economies of the world, with one frequency across 5 unique grids. But the challenge facing the country, rather the world, is that the renewable resource is not where the fossil fuel resource generally lies.

Most of India’s transition was built in the last 15 years with the aim of evacuating coal-fired power from the regions of Orissa and Jharkhand. Today 90% of new transmission needs to evacuate solar energy from Gujarat and Rajasthan and wind energy from Tamil Nadu and Karnataka. This evacuation process is a new grid altogether, says Agarwal.

Several studies have shown that around $150-160 billion are needed to be invested in India’s transmission system alone to reach the 450 GW energy transition target. Although good debt and equity investments have poured into transmission so far, the country must keep focussing on enhancing policy to attract fresh investment to fund its climate goals.